How To Prepare Your Small Business For An Inevitable Data Breach

If some in the small business community thought to themselves, “better them than us,” after hearing that hackers had breached mega chains Target, Neiman Marcus and (possibly) Michaels, their bliss was short-lived. Reports surfaced last week that the cyber-intruders accessed Targets’ systems by first hacking one of their (comparatively) small regional contractors, Fazio Mechanical Services.

Fazio, though, is in good company: a list of the 91 breaches reported in the first 43 days of 2014 compiled by the Identity Theft Resource Center shows not just trusted brands –
Home Depot, Walgreens, TD Bank – but a variety of small medical offices and other small businesses whose owners perhaps never thought they’d be targets, too.

That is the crux of the problem facing America’s small businesses and consumers: they may not think they’ll be targets of hackers looking for big scores… but all of them probably will be. It’s just too easy and too lucrative for hackers to gather and utilize people’s personal information for anyone to be safe – including small enterprises with databases that seem at first blush to be of limited utility.

Reality check: hackers will always go after the weakest link. If they determine that the big guys have toughened up, they’re just going to go after easier targets, like small businesses.

So what is a small business owner to do? Instead of throwing up your hands and assuming you can’t afford the technology that big companies use, make the 3 Ms your mantra: Minimize, Monitor and Manage. Make yourself a harder
target and know what to do when you become one anyway.

The most important step you can take is to be proactive about your own security, rather than waiting until it’s breached. Some specific steps include:

Determine the right security technology and processes for your business, regardless of its size or complexity.

Train your employees about security – which includes not falling for spear-phishing emails, not checking personal email or social media on company systems, and not leaving unsecure devices or files unattended.

Limit access to important systems and databases to only those people who need it, assign each employee a discrete password and never allow them to share passwords for systems – social media or administrative.

Use two-factor authentication on everything you can, and require that your employees do so as well.

Put your financial systems, like payroll and banking access, on a separate computer than the one you use for other functions.

If you and your employees bring your own devices for work – like cellphones, tablets and computers – establish security protocols for those devices connected to your system and procedures for protecting them.

Make sure you have the right physical security for your business.

Require complete destruction of any documents or computers you no longer need.

And, finally, have frequent outside security reviews to ensure that you are as safe as you think you are.

Monitor Your Security

Don’t rely on a system you set up last year to work next year. On an ongoing basis, make sure that you:

Use a reputable firm to do periodic penetration testing of your network to ensure that no unauthorized user can gain access – and fix the problem immediately if someone can.

Set up automatic alerts for unusual activity on your networks, so that any such activity results in an email or text message to someone empowered and able to fix any such problem.

Install all security updates for software and operating systems in a timely fashion on all devices, even those brought in by your employees.

Scrutinize your vendors as you do your own employees: vet them and require them to engage in the same testing as you.

Manage the Damage

Make no mistake, everyone will probably experience some sort of breach in the coming years, if they haven’t already, so don’t rely on best practices to prevent future problems. Create a plan before you have an issue in order to make sure you can deal with it. Some ways to develop such a plan include:

Contact your insurance agent or your financial institution to see if they offer cyber liability coverage or a damage control program. You may be pleasantly surprised to learn that you are already protected. If not, find out what you need to do and do it.

Determine whether that plan covers all the costs of a data breach – like the expense of notifying customers or employees whose data was exposed – and whether the plan will help you and/or your customers navigate the aftermath.

Make sure you understand what, if any, time-sensitive reporting requirements are mandated after a breach in order to maintain your coverage.

Decide how you will deal with any post-breach media: will you designate someone internally to be your company’s public face, or will you hire a company to do it for you (and which company will you want to hire)?

Have a plan in place for how to deal with post-breach phone calls from affected employees and/or customers.

Decide what you will do for those individuals affected by your breach. Though it’s now standard to offer credit monitoring, that often isn’t enough for many people: you may need to contract with a company or person to guide victims of your breach through the reporting and resolution process, or do the work for them.

The dangers you face from a data breach often go far beyond penalties, fines, regulatory interactions and litigation. Depending upon the public’s perception of the urgency, empathy and transparency you demonstrate, you could face a devastating loss of trust by business partners, clients and consumers alike.

To even begin to prevent that kind of damage, start by being as protective of the customer and employee data you gather and store as you are with your own trade secrets or intellectual property.

I'm Adam K. Levin, former Director of the New Jersey Division of Consumer Affairs. I'm co-founder and chairman of both Credit.com, a leader in financial education and services, and IDT911, which provides identity and data risk management, resolution and educational services...